Insight&CommentaryonCaliforniaWorkplaceLawIssues&Developments

Contracting Around Class Actions, a Win for Employers!

In O’Connor v. Uber Techs., Inc., 2018 U.S. App. LEXIS 27343 (9th Cir. 2018), a unanimous panel in the Ninth Circuit found that Uber’s arbitration agreements did not violate the National Labor Relations Act of 1935 (“NLRA”) and the question of arbitrability was designated to the arbitrator. The ruling provided a major victory to Uber, requiring each plaintiff to separately arbitrate his or her claims.

The O’Connor plaintiffs filed a putative class action against Uber for failure to remit gratuity paid by customers, and for misclassification of the drivers as independent contractors and failing to pay their business expenses. The O’Connor plaintiffs sought an order declaring Uber’s 2013 arbitration agreements unconscionable or, alternatively, requiring Uber to provide enhanced notice and opportunities to the putative class to opt out of arbitration. The district court granted the O’Connor plaintiffs’ alternative request and Uber provided drivers with updated licensing agreements on June 21, 2014, November 2014 and April 2015.

In a separate action, plaintiff Mohamed filed a putative class action against Uber asserting various federal and California law claims. The district court denied Uber’s motion to compel arbitration finding, among other things, that the existing arbitration agreements were unenforceable. On appeal in Mohamed v. Uber Techs., Inc., 848 F.3d 1201 (9th Cir. 2016), the Ninth Circuit reversed the district court’s order finding that the arbitrator must determine whether the agreements are enforceable and that the provisions were not adhesive or unconscionable under California law.

In April 2015, the district court granted the O’Connor plaintiffs’ motion for class certification, certifying a class of approximately 160,000 on the gratuity claim. In December 2015, the district court certified an additional subclass of drivers who accepted the agreements in 2014 and 2015. In the same order, it certified the original class and subclass on the expense reimbursement claim.

In December 2015, Uber issued new arbitration agreements to all drivers, causing the plaintiffs in the O’Connor, Mohamed and other similar matters to file separate motions to enjoin Uber from distributing and enforcing the new agreement and to prevent any further communications by Uber to class and putative class members. Initially, the district court granted plaintiffs’ motion, but after the Ninth Circuit’s ruling in Mohamed the district court vacated its order. The district court permitted Uber to issue the new agreement, but refused to vacate the order retroactively. This resulted in dozens of appeals (from four related actions pending in the same district court: O’Connor v. Uber Technologies, Inc., 3:13-cv-03826-EMC; Yucescoy v. Uber Technologies, Inc., 3:15-cv-00262-EMC; Mohamed v. Uber Technologies, Inc. 3:14-cv-05200-EMC; and Del Rio v. Uber Technologies, Inc., 3:15-cv-03667-EMC), which were consolidated.

In O’Connor, the Ninth Circuit rejected plaintiffs’ argument that the lead plaintiffs constructively opted out of arbitration on behalf of the entire class. The panel relied on the Supreme Court decision in Epic Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018), finding that the arbitration agreements did not violate the NLRA, and reversed the district court’s order denying Uber’s motion to compel arbitration. The Ninth Circuit relied on its decision in Mohamed and reversed the district court’s order certifying the class, because the question whether the agreements were enforceable was designated to the arbitrator.

In light of the Ninth Circuit’s rulings, employers should examine any existing arbitration agreement or consider implementing an arbitration agreement that contains a class action waiver and provides that the arbitrator, and not the court, decide the issue of arbitrability and enforceability.

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